How to earn commitment
 

W. Chan Kim and Renée Mauborgne
  

FAIR PROCESS

The best-laid plans of managers will come to nothing if employees are not behind them. Chan Kim and Renée Mauborgne find fairness is the key.

Twenty years after its creation, British Airways had transformed itself from "Bloody Awful" to the self-styles "world's favourite airline". By 1997, employee morale and customer service had earned industry-wide acclaim. However, the strategy pursued by Robert Ayling, who had become chief executive in 1996, sapped employee morale, triggered unrest and jeopardised service. In the peak summer months of 1997, cabin crew walked out, causing hundreds of BA flights to be cancelled. Labour woes cost BA about £130m. What went wrong?

The airline's managers violated fair process - fairness in making and executing decisions. At a time when planes were full and profits were high, managers took employees by surprise when they announced a major cost-cutting programme. They did not discuss with employees why this was necessary, nor did they engage employees in the plan. Employees were not given clear messages of what they could expect. In the absence of engagement, explanation and clarity - the bedrocks of fair process - employees felt cheated, disrespected and vulnerable. They revolted.

We have spent the last ten years studying the link between fair process and companies' abilities to make the wrenching changes needed to transform themselves. In this time, we saw one common thread. With fair process, even the most painful and difficult goals can be accomplished while gaining employees' trust and co-operation. However, without fair process, even outcomes that employees might favour can be difficult to achieve.

COMMUNICATION

Consider Burmah Castrol, the UK lubricants company. Burmah Castrol devised an innovative system for water coolants used in metalworking industries. Traditionally, customers had to choose from several hundred types of complex coolants. Because of the delicacy of selecting the right  coolant, products had to be tested on production machines before a purchase was made - a challenge that involved considerable expertise, costs and logistical difficulties for customers and sales people alike.

An expert computer system promised to eliminate all that. Using artificial intelligence, it synthesised the knowledge of the company's experts in selecting and testing coolants. Customers got a leap in value - the failure rate under the expert system feel to 10 per cent from a 50 per cent industry average, machine downtime was reduced, coolant management was easier and costs declined. Moreover the company came out a winner too - the sales process was dramatically simplified, giving time for sales staff to attract new customers while reducing the cost per sale. 

Yet, the expert system was doomed. All the wonderful benefits it offered sales reps - having a way to avoid the hassling part of their job and pull in more and bigger sales by standing out head and shoulders in the industry - went unappreciated. Not because the expert system wasn't great, but because Burmah Castrol's own sales reps worked to undermine its credibility with customers.

Why? In creating the artificial intelligence system, managers though they were  doing everyone a favour so they didn't bother to engage sales reps in the process, explain the rationale behind the system, or clarify what would be expected of them. There was no fair process - fairness in making and executing decisions.

Burmah Castrol's reps felt suspicious of managers' intentions and saw the expert system in a light managers had never dreamed possible. It was a direct threat to what sales reps viewed as their most valuable contribution - tinkering in the trial process. Feeling threatened, they worked against the system and sales did not take off. Great ideas matter, but, as companies such as Burmah Castrol have discovered, so does fair process.

Fair process responds to a basic human need. Everyone, whatever their role in a company, wants to be valued as a human being and not as "personnel" or "human resources". People want respect. They want their ideas to be taken seriously and to understand the rationale behind decisions. In theoretical terms, they want intellectual and emotional recognition. Fair process has a direct link to this recognition. The practice of fair process proves through action that there is an eagerness to trust and cherish the individual as well as deep-seated confidence in the individual's knowledge, talents and expertise.

When people feel recognised for their intellectual and emotional worth, they demonstrate a willingness to co-operate and give their all. They are inspired to volunteer and share knowledge actively - essential processes in achieving high performance. However when fair process is violated, companies induce the hoarding of ideas, foot dragging and other counter-effects, including sabotage.

These counter-effects are known as retributive justice. When people feel their intellectual and emotional recognition has been violated through a lack of fair process, they seek to redress the situation not only by demanding a return to fairness but also by imposing a penalty for their unfair treatment. Figure 1 traces the relationships found in our research. This explains why, without fair process, even great ideas can fail, as seen in Burmah Castrol. However, with fair process, even the most difficult goals can be achieved.

SELF HELP

Take the example of Siemens-Nixdorf Informationssysteme (SNI). It was the largest European supplier of information technology when it was created in the early 1990s after Siemens acquired the Nixdorf Computer Company. However, by the mid-1990s, SNI had cut head count from 52,000 to 35,000. Anxiety and fear pervaded the company.

Yest, Gerhard Schulmeyer, newly appointed chief executive in 1994, earned the trust and co-operation of employees at this tumultuous time. He did this neither by making large promises that satisfied employees, nor by putting off the emotionally hard issues of restructuring.

From his appointment, Shulmeyer went out to talk to as many employees as he could. In meetings with more and 11,000 people, Schulmeyer shared his mission of engaging everyone in turning the company around. He painted a bleakly honest picture of SNI's situation: the company was losing money in spite of efforts to slash costs. Deeper cuts were needed and every business would have to demonstrate its viability or be eliminated. Schulmeyer set clear but tough rules about how decisions would be made. People did not like what they heard, but they understood. He then asked for volunteers to come up with ideas.

Within three months the initial group of 30 volunteers grew by an additional 75 SNI executives and 300 employees. The total grew from 405 into 1,000, then 3,000, then 9,000, as others were recruited to help save the company. Throughout, ideas were solicited from managers and employees alike concerning decisions that affected them, and they all understood how decisions would be made. Ideas were auctioned off to executives willing to champion and finance them. If executive did not think a proposal had merit, it would not be pursued. Although 20 to 30 per cent of proposals were rejected, employees thought the process was faire.

People voluntarily pitched in - mostly after business hours, often until midnight. In spite of accumulated losses of DM2bn, SNI was operating in the black and employee satisfaction almost doubled in just over two years, notwithstanding the radical and difficult changes.

However, intense competition finally led Siemens to sell the personal computer unit in 1998 to Acer, the low cost Taiwanese computer make and merge the other parts of SNI into Siemens. Yet, few companies have been able to muster such strong employee morale and co-operation during such a stressful corporate restructuring. With many companies needing to restructure and change  gears to become more competitive, they could learn important lessons from the way Schulmeyer exercised fair process at SNI. Without faire process, managers will either find themselves facing a long, uphill battle to institutionalise much needed changes or will have to back off as employees seek public support for managers' failure to pay intellectual and emotional respect to them.

KEY QUESTIONS

 To put fair process to work in your company, begin by asking: do we engage people in decisions that affect them by not only asking for input, but allowing them to refute the merit of one another's ideas? Do we explain why decisions are made and why people's opinions may have been overridden? People can accept pain if they understand why it is necessary. Finally, once a decision is made, do we state the new rules clearly? Employees should be told the standards by which they will be judged and the penalties for failure. What are the targets and milestones? Who is responsible for what?

To transform themselves, companies need to earn the intellectual and emotional commitment of their employees. Fair process does that.